Proposals Regarding the Future of the Standards Advisory Council (SAC)
Proposals for the future of the SAC are part of the second part of the Constitutional Review. The Chairman noted that because the term of the current Chairman of the SAC, Nelson Carvalho, is ending, a subgroup was created to form ideas on the future of the SAC so that the incoming Chairman of the SAC would be aware of the responsibilities that may change in light of these proposals.
Phil Laskawy, IASCF Vice-Chair and the chair for the SAC subgroup, presented the subgroup's recommendations. The focus was to enhance the role of the SAC, integrate it better into the overall IASCF organisation, and to make the process more effective. The recommendations include what the SAC should do, who should be participants, and the number of meetings. The sub-group recommended that:
- The primary purpose of the SAC is to advise the Board.
- The Chairman of the SAC should be rotated every three years.
- There was support for two plenary meetings and one regional meeting, but this is open for discussion and to be determined.
- The membership of the SAC should primarily be persons who serve as representatives of appropriate organisations, with the ability of the Trustees to appoint several members as individuals who do not represent organisations. This would be different from the current approach whereby SAC members are appointed as individuals rather than as representative of organisations. Mr Laskawy noted that this was the most important change to the SAC of all the recommendations made.
Regarding the last recommendation on composition, the IASCF Director of Operations commented that the vision is that the representative of an organization would serve as a liaison between the SAC and the organization. Therefore, the representative would not necessarily be an employee or member of that organisation, but that the organisation would participate to help select their appropriate liaison. It was also noted that all these recommendations were acceptable within the language of the current Constitution, so amendment of the Constitution is not needed.
Current SAC Chairman Nelson Carvalho offered the following comments, which he had previously communicated to the subgroup and which are incorporated in the subgroup's paper provided to the Trustees:
- Proper mix between representatives of organisations versus individuals.
- Introductory session to get new members involved and aware of their responsibilities.
- The need for action against non-performers.
- Breakout sessions in the plenary sessions should be maintained.
- Keep voting by the SAC rare.
- Enhance feedback from the IASB and the Trustees regarding the SAC's advice.
- Supportive of regional meetings.
- Future SAC Chairman should come from the existing SAC members because their experience will make the transition easier. Also suggested that the identified new Chairman can assist in the November 2008 meeting.
The IASCF Chairman asked the Trustees for comments on their views on regional SAC meetings, since this remained an open question in the subgroup's recommendations. He clarified that there would be two plenary meetings and then several open regional meetings which would allow the SAC members, Trustees, and others within the region outside of SAC to discuss regulatory or practical issues specific to the region. Several Trustees agreed with having regional meetings. One Trustee noted that regional meetings require substantial time and effort for the Chairman. Therefore, he also suggested keeping an option open for a SAC vice-chairman to provide an additional resource to conduct further regional activities, thereby enhancing the understanding of the regional issues. One Trustee had concerns with cutting down the plenary meetings from three to two, particularly because of the long time gap between meetings. Therefore, he suggested retaining the three plenary meetings, in addition to conducting regional meetings.
Regarding the size and composition of the SAC, some Trustees said that it would be difficult to have fewer than the current 40 members and continue to be inclusive, even though this larger size may affect efficiency. However, other Trustees noted that the quality of the members is more important to efficiency, which will come through the selection process of these organisations. In general, there was support for the suggestion of more representatives of organisations.
Based on the discussions, the Trustees concluded that:
- There was support for a structure containing primarily representatives of organisations, with some individuals.
- There was support for more regional activities, but the frequency of the plenary and regional meetings will be discussed at a later time when the new Chairman of the SAC is decided.
- Regarding feedback to the SAC, both the following options could be undertaken:
- The IASB staff could note where SAC expressed a particular view on a topic in the IASB meeting papers, and the IASB could address the views during the public meeting.
- The IASC could also dedicate a portion of their public meetings to discuss the views received at the last SAC meeting and determine items to raise at the next SAC meeting.
Review of Long-term Funding of the IASC Foundation
The IASC Foundation Director gave a very brief report on the current state of the ongoing efforts to secure a stable long-term funding base for the Foundation.
Several processes are being undertaken in countries to achieve this. In India, Spain, and potentially Israel, the stock exchanges are organising a levy collection process on registered entities. In Canada, a levy collection system is also underway organised by the securities regulator and the accounting standards body.
Currently, the IASCF had secured approximately £13.7 million of the £16 million annual funding it is seeking. The levy systems have been working since they have been successful in the collection of the committed funds, receiving approximately half of the budget.
Report of the IASB Chairman
The IASB Chairman reported on IASB activities. He highlighted the projects relating to the MOU between the IASB and FASB, noting that the goal is to complete those projects by 2011. The two Board's met in April to consider how best to meet that deadline. They did not change the projects but rather recognised that they will need to carefully consider the scope of each project and stop increasing the issues to address within each project. Regarding the convergence projects, he noted that the most urgent in light of the credit crisis are (1) fair value measurement and (2) derecognition of financial instruments. Some questions were asked for more information on the fair value measurement project, the interaction between the conceptual framework project and the liabilities and equity project, the some other projects not related to the MOU, including the IFRS for Private Entities (formerly IFRS for Small and Medium Entities).
The IASB Chairman noted the priority of several projects was raised to respond to the credit crisis. He noted that the three issues central to the issues are (1) valuation of collaterised debt, for which an valuation expert advisory panel has been created, (2) consolidation, for which a draft of an exposure draft will be presented to the Board in July, and (3) derecognition of financial instruments, for which the Board is proposing to move to the active agenda. The IASB Directors on the consolidation and derecognition projects responded to several Trustees' questions regarding these projects.
The IASCF Chairman asked the Trustees if they agree that the two research agenda items, (1) Liabilities and Equity and (2) Derecognition of Financial Instruments, should be put on the active agenda. The Trustees agreed that they should be added.
In response to a Trustee's comment regarding whether there should be some sort of emergency procedures to respond quickly to urgent matters (such as the credit crisis), the IASCF Chairman noted that they should consider incorporating emergency procedures in part two of the Constitutional Review. The IASB Chairman noted that they also plan to conduct roundtables around the consolidation and derecognition projects to expedite these topics.
Report of the SAC Chairman
The SAC Chairman presented the views of SAC members at the June 2008 meeting on several IASB agenda items.
- There was general support for the IASB agenda items although SAC members recommended that the due process not be sacrificed to appease the pressure by regulators for completion.
- There is support for the consolidation project.
- They recommended that the derecognition project be coordinated with the consolidation project since they are interrelated.
- There was no objection to the projects on the active agenda, but recommended that lower priority is given to non-MOU items in order to meet the 2011 timeline for the MOU.
- There was general support for the liabilities and equity project but SAC members recommended that the conceptual framework issues also affecting this project be considered.
Regarding the Constitutional Review, concerns were already voiced in the previous discussion.
Items suggested by the SAC Agenda Committee to be on the agenda in November for a revisit by the Board are revenue recognition, conceptual framework, consolidations, financial instruments and the expert panel, financial statement presentation, and private entities. Also non-technical matters related to those adopting IFRSs, particularly what are the issues when initially adopting and how those issues have been resolved in particular jurisdictions. SAC would also like to invite the new coordinator of the IFRIC to the November SAC meeting to share views on how IFRIC will address implementation activities. SAC would also like to take that opportunity to share experiences on post-implementation reviews.
Regarding the SAC minutes, one Trustee asked if, in light of the proposals on the future of SAC made previously, there should be more of an attempt to come to a majority agreement which would represent the SAC advice to the Board (in other words, take a vote on issues). To capture the views, the SAC Chairman suggested that one or more Board members summarise what they have observed as key issues by SAC. Then a SAC member would ensure that the summary of views is complete. He noted that the SAC has tried to avoid voting to prevent a bias of the views of those that speak during the meeting over those that do not. He also commented that improvement of their procedures could also be tackled in the discussions on the future procedures of the SAC.
Report of the Due Process Oversight Committee
IASB will conduct a review of the effectiveness of IASB working groups. The objective will be to determine how to make working groups better and to obtain feedback from current members of all working groups. Regarding timing, they originally were targeting the last IASCF Trustee meeting for the year (October 2008), but because the Constitutional Review is a higher priority, they are now targeting a completion date of January 2009.
The IASCF staff provided Trustees with a first effort to amend the Due Process Handbook to reflect all the activities that are performed. During that process, it sparked discussion on how far to define impact assessment (also known as an Effect Analysis) and whether these assessments are consistent with the Framework. Some discussion ensued among the Trustees on impact assessments, particularly whether the IASB was comfortable doing the assessment and if it was more appropriate for an economic analysis firm to do. Some noted that an impact analysis is important since the macro-economic consequences are relevant to supporting the standard-setters' accounting decisions. Since a further discussion is needed on impact assessments, the Due Process Handbook will be revisited at a later date.
Finally, the Trustees were asked if there were any additional topics to put on the agenda for the next joint meeting with the IASB in September. No additional topics were provided.
This summary is based on notes taken by observers at the IASCF meeting and should not be regarded as an official or final summary.